European Central Bank announces further interest rate cut of 0.25%
Frankfurt, Central European The Germany Bank In
The European Central Bank (ECB) cut interest rates again today by 0.25% in a bid to help the faltering economy as the threat of inflation continues to recede.
This cut, announced following the ECB’s final meeting of the year, means that interest rates have been cut four times since June which has been good news for borrowers. There had been speculation that a 0.5% cut was on the cards for this meeting but that didn’t come to fruition.
This 0.25% reduction, which will have an immediate effect on tracker mortgage-holders, brings rates down to 3%.
Broker and managing director of Dowling Financial Michael Dowling has said this 0.25% cut will see tracker mortgage repayments drop by €13 a month for every €100,000 they owe.
“Mortgage repayments will have fallen by €52 per month on every €100,000 since June,” he added.
“The really good news for mortgage holders is that markets are pricing in a further 1% decrease in 2025 which will see mortgage repayments for tracker holders fall by a further €52 per month for every €100,000 owed.”
However, Mr Dowling has noted that he hasn’t seen any decrease in variable rates charged which still range between 3.75% and 4.7%%.
“I expect fixed rates to fall to 3% for three and five year fixed options which will bring reductions of €85 to €125 per month on the average €300,0000 mortgage for new or switcher mortgage customers,” he said.
In recent months, the debate around interest rate cuts has shifted to whether the ECB is easing its monetary policy fast enough to support the European economy which is at risk of recession along with political instability.
These challenges could be exasperated by the potential for a trade war with the US when president-elect Donald Trump takes office.
In a statement outlining its decision, the ECB explained that it sees headline inflation across the eurozone averaging 2.4% this year and 2.1% next year, For inflation excluding energy and food, staff project an average of 2.9% in 2024 and 2.3% in 2025.
The ECB’s inflation target has been 2% over the medium term with inflation across the euro area estimated to be 2.3% during November. In Ireland, the Consumer Price Index shows prices rose by 1% over the year to the end of November.
“Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter,” the ECB said.
“Staff see the economy growing by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027.”
The ECB said that recovery rests on rising real incomes and firms increasing investment.
“Over time, the gradually fading effects of restrictive monetary policy should support a pick-up in domestic demand. “ Additional reporting Reuters